Indian non-bank financial sector profit expected to be flat: Fitch Ratings

Improving credit growth, diminishing asset quality risk will be the character of India’s non-bank financial institutions (NBFIs) in FY23, Fitch Ratings said on Monday.

According to the rating agency, this status should support NBFI’s performance amid a broadening economic recovery, although some segments may still be vulnerable to higher-than-expected inflation.

Fitch revised India’s “BBB-” sovereign rating outlook from stable to negative in June 2022.

This was underscored by a rapid economic recovery and easing weaknesses in the financial sector, which reduce downside risks to the country’s medium-term growth despite short-term inflationary headwinds, the rating agency said. .

Gross domestic product (GDP) rebounded 8.7% in FY22 after contracting 6.6% in FY21.

Fitch said it expects strong medium-term growth potential of around 7% between FY24 and FY27 (FY23: 7.8%).

“We do not expect a significant increase in non-performing loans (NPLs) as an economic recovery should support borrowers’ ability to repay. on more economically sensitive sectors such as SMEs (small and medium-sized enterprises) and real estate developers,” Fitch said.

The funding and liquidity profiles of large NBFIs are expected to remain stable even as funding costs rise alongside rising policy rates both domestically and internationally.

“The effect on NBFI net interest margins will differ depending on their lending segment and pricing power. Nonetheless, we expect industry profitability to remain broadly flat given anticipated lending volumes. and improved credit costs,” added Fitch.



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